5 12-39 Risk and NPV: Sensitivity Analysis J. Morgan of SparkPlug Inc. has been approached to take over a production facility from B.R. Machine Company. The acquisition will cost $1,500.000, and the after-tax net cash inflow will be $275.000 per year for 12 years. Sparkplug currently uses 12% for its after-tax cost of capital. Tom Morgan, production manager, is very much in favor of the investment. He argues that the total after-tax net cash inflow is more than the cost of the investment, even if the demand for the product is somewhat uncertain. "The project will pay for itself even if the demand is only half the projected level." Cindy Morgan (corpo- rate controller) believes that the cost of capital should be 15% because of the declining demand for SparkPlug products Required I. Should Morgan accept the project if its after-tax cost of capital is 12%? 2. If Cindy Morgan is correct and uses 15%, does that change the investment decision